<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
AMERICAN HEALTH PROPERTIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
American Health Properties, Inc.
6400 SOUTH FIDDLER'S GREEN CIRCLE, SUITE 1800
ENGLEWOOD, COLORADO 80111
---------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 23, 1997
The 1997 Annual Meeting of Shareholders of American Health Properties,
Inc., a Delaware corporation (the "Company"), will be held at the Regent Beverly
Wilshire Hotel, 9500 Wilshire Boulevard, Beverly Hills, California at 1:30 p.m.
local time, on May 23, 1997, for the following purposes:
(1) To elect two Class I directors to a term of three years.
(2) To approve the appointment of the accounting firm of Arthur
Andersen LLP as the Company's auditors and independent public accountants
for the fiscal year ending December 31, 1997.
(3) To transact such other business as may properly come before the
meeting or any adjournment thereof.
Holders of record of the Company's common stock, $.01 par value (the
"Common Stock") and Psychiatric Group Depositary Shares (the "Depositary
Shares") as of the close of business on April 3, 1997 (the "Record Date") are
entitled to notice of and to vote on the matters presented at the Annual
Meeting. Each Depositary Share represents one-tenth of one share of the
Company's Psychiatric Group Preferred Stock, $.01 par value (the "Psychiatric
Group Preferred Stock"), which has been deposited with ChaseMellon Shareholder
Services, L.L.C., as Depositary (the "Depositary"). The Common Stock and the
Psychiatric Group Preferred Stock vote as a single class at the Annual Meeting,
with each holder of Common Stock being entitled to one vote per share and each
holder of Depositary Shares being entitled to instruct that .7515 of a vote per
Depositary Share be cast by the Depositary.
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED
PROXY OR INSTRUCTION CARD, AS THE CASE MAY BE, AS SOON AS POSSIBLE.
HOLDERS OF COMMON STOCK MAY VOTE BY COMPLETING THE ENCLOSED PROXY AND
RETURNING IT IN THE ENCLOSED ENVELOPE. THE PROXY IS REVOCABLE AT ANY TIME. ANY
HOLDER OF COMMON STOCK ENTITLED TO VOTE AND WHO ATTENDS THE ANNUAL MEETING MAY
VOTE PERSONALLY ON ALL MATTERS BROUGHT BEFORE THE ANNUAL MEETING AND, IN THAT
EVENT, HIS OR HER PROXY WILL NOT BE USED.
HOLDERS OF DEPOSITARY SHARES MAY ONLY VOTE BY COMPLETING THE ENCLOSED
INSTRUCTION CARD AND RETURNING THE CARD TO THE DEPOSITARY IN THE ENCLOSED
ENVELOPE. THE INSTRUCTION CARD MAY BE REVOKED AT ANY TIME PRIOR TO 5:00 P.M.
PACIFIC DAYLIGHT TIME ON MAY 22, 1997 BY GIVING NOTICE TO THE DEPOSITARY OR BY
FILING A LATER DATED INSTRUCTION CARD WITH THE DEPOSITARY. THE DEPOSITARY WILL
VOTE THE PSYCHIATRIC GROUP PREFERRED STOCK REPRESENTED BY THE DEPOSITARY SHARES
IN ACCORDANCE WITH SUCH INSTRUCTIONS. IN THE ABSENCE OF SPECIFIC INSTRUCTIONS
FROM ANY HOLDER OF DEPOSITARY SHARES, THE DEPOSITARY WILL ABSTAIN FROM VOTING
WITH RESPECT TO THE PSYCHIATRIC GROUP PREFERRED STOCK UNDERLYING SUCH DEPOSITARY
SHARES.
By Order of the Board of Directors,
/s/ THOMAS T. SCHLECK
Thomas T. Schleck
Corporate Secretary
April 16, 1997
<PAGE> 3
American Health Properties, Inc.
6400 SOUTH FIDDLER'S GREEN CIRCLE, SUITE 1800
ENGLEWOOD, COLORADO 80111
------------------------
PROXY STATEMENT
------------------------
This proxy statement and the enclosed Proxy or Instruction Card, as the
case may be, are first being mailed on or about April 23, 1997 to shareholders
of the Company, in connection with the solicitation by the Board of Directors of
the Company of proxies for use at the annual meeting of shareholders to be held
on May 23, 1997, and any adjournments thereof.
The total cost of soliciting proxies will be borne by the Company. The
Company has engaged the firm of Corporate Investor Communications, Inc. as proxy
solicitors. The fee to such firm for solicitation services is estimated to be
$5,000, plus reimbursement of out-of-pocket expenses. In addition, proxies may
be solicited by officers and regular employees of the Company, without extra
remuneration, by personal interviews, telephone and telegraph. It is anticipated
that banks, brokerage houses and other custodians, nominees and fiduciaries will
forward soliciting material to beneficial owners of shares entitled to vote on
the matters presented at the meeting, and such persons will be reimbursed for
the out-of-pocket expenses incurred by them in this connection.
RECORD DATE AND VOTING SECURITIES
Only holders of the Company's $.01 par value Common Stock (the "Common
Stock") and Psychiatric Group Depositary Shares (the "Depositary Shares") as of
the close of business on April 3, 1997 (the "Record Date") are entitled to
notice of and to vote on the matters presented at the Annual Meeting. Each
Depositary Share represents one-tenth of one share of the Company's Psychiatric
Group Preferred Stock, $.01 par value (the "Psychiatric Group Preferred Stock").
The Psychiatric Group Preferred Stock has been deposited with ChaseMellon
Shareholder Services, L.L.C., as Depositary (the "Depositary"). As the
registered holder of the Psychiatric Group Preferred Stock, the Depositary will
vote the Psychiatric Group Preferred Stock represented by the Depositary Shares
at the Annual Meeting pursuant to instructions given to the Depositary by the
holders of the Depositary Shares. Holders of Depositary Shares will therefore
exercise their vote by instructing the Depositary pursuant to the Instruction
Card enclosed with this proxy statement. In the absence of specific instructions
from any holder of Depositary Shares, the Depositary will abstain from voting
with respect to the Psychiatric Group Preferred Stock underlying such Depositary
Shares.
On the Record Date, there were outstanding 23,455,027 shares of Common
Stock as well as 2,083,931 Depositary Shares representing approximately 208,393
shares of Psychiatric Group Preferred Stock, which constituted all of the
outstanding voting securities of the Company. Each share of Common Stock is
entitled to one vote on all matters presented at the Annual Meeting. Each full
share of Psychiatric Group Preferred Stock is entitled to 7.515 votes on all
matters presented at the Annual Meeting; accordingly, each
<PAGE> 4
Depositary Share is entitled to instruct that .7515 of a vote per Depositary
Share be cast by the Depositary on all matters presented at the Annual Meeting.
The number of votes to which the Psychiatric Group Preferred Stock (and thereby
the Depositary Shares) is entitled differs from year to year, but is based on a
ratio of the average market price of one share of the Psychiatric Group
Preferred Stock to the average market price of one share of Common Stock for the
ten trading days preceding the Record Date. There is no cumulative voting. The
presence of a majority of the votes represented by the Common Stock and the
Psychiatric Group Preferred Stock outstanding and entitled to vote, considered
as a single class, is required to constitute a quorum. The affirmative vote of a
majority of the total number of votes represented by the shares of Common Stock
and Psychiatric Group Preferred Stock represented and voted at the Annual
Meeting, assuming a quorum is present, is necessary for the approval of all
matters presented at the meeting. Abstentions and broker non-votes are counted
for purposes of determining the presence or absence of a quorum for the
transaction of business. Abstentions are counted in tabulations of the vote cast
on proposals presented to the shareholders and thus have the same effect as a
negative vote, whereas broker non-votes are not tabulated for any purpose in
determining whether a proposal has been approved.
A list of the shareholders entitled to vote on the matters presented at the
Annual Meeting may be examined at the Company's principal executive offices,
which are located at 6400 South Fiddler's Green Circle, Suite 1800, Englewood,
Colorado, 80111, during the ten-day period preceding the Annual Meeting.
VOTING PROCEDURES
PROXY FOR COMMON STOCK
If the enclosed Proxy is properly executed and returned, the shares of
Common Stock represented thereby will be voted in the manner specified. If no
specification is made on the Proxy, then the shares shall be voted in accordance
with the recommendations of the Board of Directors. A Proxy may be revoked by a
shareholder at any time prior to the exercise thereof by written notice to the
Secretary of the Company, by submission of any other Proxy bearing a later date
or by attending the Annual Meeting and voting in person.
The accompanying Proxy will also be voted in connection with the
transaction of such other business as may properly come before the Annual
Meeting or any adjournment thereof. Management knows of no other matters other
than the matters set forth above to be considered at the Annual Meeting. If,
however, any other matters properly come before the Annual Meeting or any
adjournment or adjournments thereof, the person named in the accompanying Proxy
will vote such Proxy in accordance with his best judgment on such matter. The
persons named in the accompanying Proxy will also, if in their judgment it is
deemed to be advisable, vote to adjourn the Annual Meeting from time to time.
Only those Proxies that are properly executed and received by 1:30 p.m.
Pacific Daylight Time on May 23, 1997 will be voted at the Annual Meeting.
INSTRUCTION CARD FOR DEPOSITARY SHARES
Holders of Depositary Shares may only vote by completing the enclosed
Instruction Card and returning the card to the Depositary. The Depositary will
vote the Psychiatric Group Preferred Stock represented by the Depositary Shares
in accordance with such instructions. In the absence of specific instructions
from a holder
2
<PAGE> 5
of Depositary Shares, the Depositary will abstain from voting with respect to
the Psychiatric Group Preferred Stock underlying such Depositary Shares. An
Instruction Card may be revoked by a shareholder at any time prior to 5:00 p.m.
Pacific Daylight Time on May 22, 1997 by written notice to the Depositary or by
filing a later dated Instruction Card with the Depositary. Holders of Depositary
Shares cannot vote such shares in person at the Annual Meeting.
The accompanying Instruction Card will also be voted in connection with the
transaction of such other business as may properly come before the Annual
Meeting or any adjournment thereof. Management knows of no other matters other
than the matters set forth above to be considered at the Annual Meeting. If,
however, any other matters properly come before the Annual Meeting or any
adjournment or adjournments thereof, the Depositary will vote in accordance with
its best judgment on such matter. The Depositary will also, if in its judgment
it is deemed to be advisable, vote to adjourn the Annual Meeting from time to
time.
Only those Instruction Cards that are properly executed and received by the
Depositary by 5:00 p.m. Pacific Daylight Time on May 22, 1997 will be utilized
by the Depositary to vote the Psychiatric Group Preferred Stock at the Annual
Meeting.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
There are currently eight members of the Board of Directors. The members of
the Board of Directors are divided into three classes. Class I consists of two
directors who are serving a three-year term expiring at the Annual Meeting.
Class II consists of three directors who are serving a three-year term expiring
at the 1998 annual meeting of shareholders. Class III consists of three
directors who are serving a three-year term expiring at the 1999 annual meeting
of shareholders. In each case, a director serves for the designated term and
until his respective successor is elected and qualified. Vacancies on the Board
of Directors may be filled by the affirmative vote of a majority of the
remaining directors then in office. A director elected to fill a vacancy
(including a vacancy created by an increase in the Board of Directors) shall
serve for the remainder of the full term of the class of directors in which the
vacancy occurred or the new directorship was created.
The terms of Messrs. Barker and Fishel expire at the Annual Meeting. Mr.
Barker has elected not to stand for re-election as a director, and his term as a
director will expire at the Annual Meeting. The Board of Directors has nominated
James L. Fishel and James D. Harper, Jr. for election as Class I directors. In
the event any nominee is unable to or declines to serve as a director at the
time of the Annual Meeting (which is not anticipated), Proxies will be voted for
the election of such person or persons, if any, as may be designated by the
present Board of Directors. Information with respect to each nominee is set
forth under the heading entitled "Management -- Directors and Executive
Officers" or "-- Persons Nominated or Chosen To Become Directors."
3
<PAGE> 6
Nominations to the Board of the Directors will not be accepted at the
Annual Meeting. The affirmative vote of a majority of the total number of votes
represented by the shares of Common Stock and Psychiatric Group Preferred Stock
represented and voted at the Annual Meeting, assuming a quorum is present, is
necessary for the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF JAMES L. FISHEL
AND JAMES D. HARPER, JR. AS DIRECTORS OF THE COMPANY.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names and titles of the executive
officers and current members of the Board of Directors of the Company.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
Joseph P. Sullivan................... Chairman of the Board of Directors of the Company,
President and Chief Executive Officer, Class II
Director
C. Gregory Schonert.................. Senior Vice President and Chief Development Officer
of the Company
Michael J. McGee..................... Senior Vice President, Chief Financial Officer and
Treasurer of the Company
Thomas T. Schleck.................... Senior Vice President, Chief Investment Officer and
Secretary of the Company
Norman Barker, Jr.................... Class I Director
Royce Diener......................... Class II Director
James L. Fishel...................... Class I Director
Charles M. Haar...................... Class II Director
Sheldon S. King...................... Class III Director
Walter J. McNerney................... Class III Director
Louis T. Rosso....................... Class III Director
</TABLE>
Mr. Sullivan has been the President and Chief Executive Officer of the
Company since February 1993 and Chairman of the Board since November 1996. Prior
to that, Mr. Sullivan spent 20 years with Goldman, Sachs & Co. where he had
overall investment banking responsibility for numerous companies in the health
care field. He is a member of the Board of Governors of the National Association
of Real Estate Investment Trusts (NAREIT). He has been a director of the Company
since February 1993 and is 54 years old.
Mr. Schonert has been the Senior Vice President and Chief Development
Officer of the Company since April 1988. Prior to that, Mr. Schonert had been
the Assistant Administrator of Marketing and Planning at St. Joseph's Hospital,
Houston, Texas since February 1987. From September 1985 until February 1987,
4
<PAGE> 7
Mr. Schonert was a Manager in the Corporate Development Department of American
Medical International, Inc. ("AMI"), an international owner and operator of
for-profit hospitals, and is 42 years old.
Mr. McGee has been the Senior Vice President and Chief Financial Officer of
the Company since January 1996, has served as Treasurer of the Company since
August 1995 and has served as Controller of the Company since November 1989. Mr.
McGee was a certified public accountant with Arthur Andersen LLP from May 1977
to November 1989 and is 41 years old.
Mr. Schleck has been the Senior Vice President and Chief Investment Officer
of the Company since April 1996 and Secretary of the Company since May 1996.
Prior to that, Mr. Schleck was a Managing Director/Partner of Covington Group,
LC from July 1994 to April 1996, and from October 1988 to May 1994 he was Chief
Financial Officer and Treasurer of EPIC Healthcare Group, Inc. From March 1982
to October 1988, Mr. Schleck was Corporate Vice President/Treasurer of AMI, and
prior to that, he held various positions in health care lending with Bank of
America NT&SA from June 1970 to March 1982. Mr. Schleck is 49 years old.
Mr. Barker has been a director of the Company since its organization in
1986. Mr. Barker has elected not to stand for re-election as a director, and his
term as a director will expire at the Annual Meeting.
Mr. Diener was the President and Chief Executive Officer of AMI from 1975
until 1979, and continued with AMI as Chairman and Chief Executive Officer until
1985. From 1985 until January 1988, Mr. Diener served as Chairman of AMI. He
again served as Chairman and Chief Executive Officer from September 1988 until
February 1989, after which he continued as a director until his retirement from
the board of AMI in November 1989. Mr. Diener was a member of the Board of
Directors of Acuson, Inc. from 1985 until August 1996 and continues as a
consultant to that company. He was a member of the Board of Directors of
Advanced Technology Venture Fund from 1985 until June 1996 and is currently a
member of the Board of Directors of UStel, Inc. Mr. Diener has been a director
of the Company since its organization in 1986 and is 79 years old.
Mr. Fishel was the Vice President and Chief Credit Officer of General
Electric Capital Corporation, the financial arm of General Electric Corporation
from 1984 to 1994. Mr. Fishel is a director of Noble Drilling Corporation. Mr.
Fishel has been a director of the Company since May 1994 and is 65 years old.
Mr. Haar has been the Louis D. Brandeis Professor of Law at Harvard
University since 1975. Mr. Haar is a director of Banner Aerospace, Inc. He has
been a director of the Company since its organization in 1986 and is 76 years
old.
Mr. King has been the Executive Vice President of Salick Health Care, Inc.
since February 1994. He was formerly the President of Cedars-Sinai Medical
Center, Los Angeles, California from 1989 to January 1994. Previously, he served
as President of Stanford University Hospital from 1986 to 1989. He has been a
director of the Company since February 1988 and is 65 years old.
Mr. McNerney was Chairman of the Board from February 1988 until November
1996 and was Chief Executive Officer of the Company from February 1988 to May
1992 and from January 1993 to February 1993. Mr. McNerney will resign as a
director of the Company effective at the Annual Meeting and at that time will be
appointed as Chairman Emeritus in recognition of his many years of exemplary
service to the Company.
5
<PAGE> 8
Mr. Rosso has been the Chairman of the Board and Chief Executive Officer of
Beckman Instruments, Inc., a leading supplier of laboratory systems for life
sciences and diagnostics since 1989. He is a member of the Board of Directors of
Allergan, Inc. Mr. Rosso has been a director of the Company since May 1994 and
is 63 years old.
PERSONS NOMINATED OR CHOSEN TO BECOME DIRECTORS
The following table sets forth the names and titles of the one nominee to
the Board of Directors who is not currently serving as a director of the Company
and one person chosen by the Board to become a member of the Board effective at
the Annual Meeting.
<TABLE>
<CAPTION>
NAME POSITION
---- --------
<S> <C>
James D. Harper, Jr.................. Class I Director Nominee
John P. Mamana, M.D.................. Chosen To Become Class III Director
</TABLE>
Mr. Harper has been nominated by the Board for election as a Class I
Director to fill the vacancy that will be created by Mr. Norman Barker, Jr. who
has elected not to stand for re-election. He is the owner of JDH Realty Co., a
real estate sales and development company located in Miami, Florida and has been
its President since 1982. Mr. Harper also is the principal partner in AH
Development, S.E. and AH HA Investments, S.E., real estate development
partnerships in Puerto Rico. He has been a Trustee of the Urban Land Institute
and a Trustee of Equity Residential Properties Trust since 1993. In 1997, Mr.
Harper was elected to the Board of Directors of Burnham Pacific Properties, Inc.
From 1971 until 1985, he worked for Continental Illinois Corporation, serving as
its Executive Vice President in charge of all domestic and international real
estate services beginning in 1974. Mr. Harper is 63 years old.
Dr. Mamana has been chosen by the Board to become a Class III Director to
fill the vacancy that will be created by the resignation of Walter J. McNerney.
Dr. Mamana is the founder of Virginia Medical Associates, P.C., a
multi-specialty group medical practice and has been its President, Chief
Executive Officer and Chairman since 1978. Since August 1994, he has been the
Chief Executive Officer and Chairman of Gateway Physician Services, L.P. and
Chief Medical Officer of Health Partners, Inc., a physician practice company
jointly funded by Oxford Health Plans and Wellpoint Health Network. Dr. Mamana
has been a director of Mid Atlantic Medical Services, Inc. since 1997 and is 54
years old.
BOARD COMMITTEES AND MEETINGS
The Board of Directors held nine meetings during 1996. Due to illness, Mr.
McNerney attended fewer than 75% of the meetings of the Board and its committees
on which he served. No other director attended fewer than 75% of the meetings of
the Board and its committees on which he served.
The Company's Board of Directors has standing Audit, Finance, Investment
and Compensation and Board Affairs Committees.
The Audit Committee, composed exclusively of directors who are not
employees of the Company, meets with the Company's independent auditors from
time to time during the course of their audit and throughout the year to review
audit procedures and receive recommendations and reports from the auditors. The
Audit
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<PAGE> 9
Committee monitors the Company's compliance with federal tax laws and
regulations necessary to maintain the Company's status as a real estate
investment trust ("REIT"). In addition, this Committee monitors all corporate
activities to assure conformity with good practice and government regulations.
During 1996, the Audit Committee consisted of Messrs. Haar (chairman), Barker
and Diener. The Audit Committee met one time during 1996.
The Finance Committee is charged with the responsibility of evaluating the
overall financial needs and financial strategy of the Company. The Finance
Committee met one time during 1996. During 1996, this Committee was composed of
Messrs. King (chairman), Barker, Diener, Haar, McNerney and Sullivan.
During 1996, the members of the Investment Committee were Messrs. Diener
(chairman), Fishel, King, McNerney and Sullivan. This Committee is responsible
for reviewing proposed investments and divestitures to be made by the Company.
The Investment Committee met three times during 1996.
During 1996, the members of the Compensation and Board Affairs Committee
were Messrs. Barker (chairman), King, McNerney and Rosso. This Committee is
responsible for reviewing and recommending to the full Board compensation of
officers and directors, management's nominees for officers of the Company and
the terms of employment agreements to assure continuity of a well-qualified
management team. The Compensation and Board Affairs Committee is also
responsible for corporate governance, Board governance and policies, nominations
to the Board of Directors and Board Committee structure and membership. This
Committee met five times during 1996.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES AND EXCHANGE ACT OF 1934
The Company's directors and executive officers and persons who are
beneficial owners of more than 10% of the Common Stock or the Depositary Shares
("10% beneficial owners") are required to file reports of their holdings and
transactions in Common Stock and the Depositary Shares with the Securities and
Exchange Commission (the "Commission") and to furnish the Company with such
reports. Based solely upon its review of the copies of such reports the Company
has received or upon written representations it has obtained from certain of
these persons, the Company believes that, as of February 14, 1997, all of the
Company's directors, executive officers and 10% beneficial owners had complied
with all applicable Section 16(a) filing requirements.
7
<PAGE> 10
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth, as of April 15, 1997, the shares of Common
Stock and Depositary Shares beneficially owned (including shares subject to
options exercisable within 60 days of such date) by each Director, Director
nominee, person chosen to become a Director and Named Executive Officer, and all
such persons as a group. Except as otherwise indicated, to the knowledge of the
Company, all persons listed below have sole voting and investment power with
respect to their shares of Common Stock and Depositary Shares. The beneficial
holdings of each person listed below represent less than 1% of the outstanding
shares of Common Stock and Depositary Shares.
<TABLE>
<CAPTION>
COMMON STOCK DEPOSITARY SHARES
-------------------------------------- --------------------------------------
OPTIONS TOTAL OPTIONS TOTAL
SHARES EXERCISABLE SHARES SHARES EXERCISABLE SHARES
NAME OF HELD WITHIN 60 BENEFICIALLY HELD WITHIN 60 BENEFICIALLY
BENEFICIAL OWNER OF RECORD DAYS(1) OWNED OF RECORD DAYS(1) OWNED
---------------- --------- ----------- ------------ --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Norman Barker, Jr. (2).................... 4,782 65,000 69,782 100 5,000 5,100
Royce Diener (3).......................... 4,500 85,000 89,500 750 7,000 7,750
James L. Fishel........................... 500 35,000 35,500 0 3,000 3,000
Charles M. Haar........................... 6,000 85,000 91,000 600 7,000 7,600
James D. Harper, Jr....................... 0 0 0 0 0 0
Sheldon S. King (2)....................... 1,236 75,000 76,236 100 7,000 7,100
Michael J. McGee.......................... 12,723 49,563 62,286 1,271 4,416 5,687
John P. Mamana, M.D....................... 2,000 0 2,000 0 0 0
Walter J. McNerney........................ 5,000 125,000 130,000 500 11,000 11,500
Louis T. Rosso............................ 1,000 35,000 36,000 0 3,000 3,000
Thomas T. Schleck......................... 0 13,074 13,074 0 0 0
C. Gregory Schonert....................... 12,294 62,555 74,849 1,228 6,931 8,159
Joseph P. Sullivan........................ 32,067 193,692 225,759 2,909 17,210 20,119
All Directors and Executive Officers as a
Group (13 persons)(4)................... 82,102 823,884 905,986 7,458 71,557 79,015
</TABLE>
- ---------------
(1) Excludes shares issuable upon exercise of related dividend equivalent
rights.
(2) Beneficial ownership includes shares issuable to Messrs. Barker and King in
lieu of director fees.
(3) Mr. Diener disclaims beneficial ownership of 300 Depositary Shares that are
owned by his wife.
(4) Total beneficially owned represents approximately 3.7% of the outstanding
shares of Common Stock and approximately 3.7% of the outstanding Depositary
Shares.
8
<PAGE> 11
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth compensation paid or earned for services
rendered during the fiscal years ended December 31, 1996, 1995 and 1994, to or
by the Company's Chief Executive Officer and the three other executive officers
of the Company (collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------
NUMBER OF
ANNUAL COMPENSATION RESTRICTED SECURITIES
------------------- STOCK UNDERLYING ALL OTHER
NAME AND POSITION SALARY BONUS AWARDS(1) OPTIONS(2) COMPENSATION(3)
----------------- -------- -------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Joseph P. Sullivan 1996 $499,800 $446,000 $ 89,400 43,191 $35,800
President and Chief 1995 477,000 384,700 143,100 53,193 58,100
Executive Officer 1994 474,800 190,800 0(4) 50,000(4) 35,900
C. Gregory Schonert 1996 174,600 89,800 0 11,492 33,900
Senior Vice President and 1995 167,200 100,000 27,100 13,509 34,000
Chief Development Officer 1994 160,400 40,600 0 4,458 32,900
Michael J. McGee 1996 163,200 110,000 0 10,820 30,500
Senior Vice President, 1995 142,900 85,500 25,100(5) 10,258(5) 30,600
Chief Financial Officer 1994 137,200 37,700(5) 0 3,303 30,600
and Treasurer
Thomas T. Schleck(7) 1996 142,200 74,000 0 26,148 126,900
Senior Vice President,
Chief Investment Officer,
and Secretary
</TABLE>
- ---------------
(1) The dollar amount of restricted stock awards is based on the fair market
price of the Company's Common Stock on the date of grant. Such prices for
1995 and 1996 were $20.625 and $22.875. On July 25, 1995, the Company
distributed one Depositary Share for every ten shares of Common Stock held
of record on July 14, 1995, each such Depositary Share representing a
one-tenth interest in one share of Psychiatric Group Preferred Stock (the
"Distribution"). Each holder of restricted Common Stock also received in the
Distribution one Depositary Share for every ten shares of restricted Common
Stock held on July 14, 1995. See "-- Adjustments to Stock and Option Awards
to Reflect the Distribution." Restricted stock awards for 1995 and 1996 vest
ratably over two years. Dividends are paid on the restricted shares at the
same rate as all other shares of Common Stock or Depositary Shares, as the
case may be.
9
<PAGE> 12
The table below shows the aggregate shares of restricted stock that were
held and remain restricted at December 31, 1996, the value of such shares
on December 31, 1996 and the number of shares granted in 1994, 1995 and
1996.
<TABLE>
<CAPTION>
AGGREGATE VALUE OF
RESTRICTED AGGREGATE GRANTS
STOCK HELD RESTRICTED ------------------------
AT DECEMBER 31, 1996 STOCK 1994 1995 1996
-------------------- ---------- ------ ----- -----
<S> <C> <C> <C> <C> <C>
Joseph P. Sullivan(4)
Common Stock 6,187 $147,700 0 6,938 3,910
Depositary Shares 423 6,700
C. Gregory Schonert
Common Stock 1,214 29,000 0 1,313 0
Depositary Shares 121 1,900
Michael J. McGee(5)
Common Stock 2,397(6) 57,300(6) 0 1,219 0
Depositary Shares 239(6) 3,800(6)
Thomas T. Schleck(7)
Common Stock 0 0 0 0 0
Depositary Shares 0 0
</TABLE>
(2) Amounts included represent options to purchase Common Stock on the date of
grant. Grants shown for 1994 and 1995 have not been adjusted for the
Distribution. Stock options vest ratably over two years and are coupled with
dividend equivalent rights.
(3) Includes amounts paid for 1996 under the Company's Money Purchase Retirement
Plan and Executive Medical and Financial Planning Reimbursement Plan, and
for life insurance policies and relocation expenses as follows:
<TABLE>
<CAPTION>
MEDICAL AND
FINANCIAL LIFE RELOCATION
RETIREMENT PLANNING INSURANCE EXPENSES
---------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Joseph P. Sullivan $29,900 $ 0 $5,900 $ 0
C. Gregory Schonert 29,900 2,800 1,200 0
Michael J. McGee 29,900 0 600 0
Thomas T. Schleck 29,900 0 3,300 93,700
</TABLE>
(4) Pursuant to an election made by Mr. Sullivan, in lieu of $157,500 of his
1993 bonus, in 1994 he received 5,807 shares of restricted stock and options
to purchase 5,807 shares of Common Stock (together with dividend equivalent
rights) at the fair market value thereof on the date the bonus was awarded.
Such restricted stock and options have been included as bonus in 1993 and
not as a grant of restricted stock or options in 1994.
(5) Pursuant to an election made by Mr. McGee, in lieu of $28,300 of the amount
shown for his 1994 bonus, in 1995 he received 1,372 shares of restricted
stock and options to purchase 1,372 shares of Common Stock (together with
dividend equivalent rights) at the fair market value thereof on the date the
bonus was awarded. Such restricted stock and options are included as bonus
in 1994 and not as a grant of restricted stock or options in 1995.
10
<PAGE> 13
(6) Includes restricted stock received by Mr. McGee, at his election, in lieu of
a portion of Mr. McGee's 1994 bonus, as set forth in Note 5 above.
(7) Mr. Schleck commenced employment with the Company in April 1996.
OPTION GRANTS IN 1996
The following table sets forth certain information concerning individual
grants of options to purchase Common Stock made to each of the Named Executive
Officers during the year ended December 31, 1996:
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE OF
SECURITIES TOTAL STOCK AVERAGE
UNDERLYING OPTIONS EXERCISE
OPTIONS GRANTED TO PRICE EXPIRATION PRESENT VALUE ON
NAME GRANTED(1) EMPLOYEES ($/SH)(1) DATE DATE OF GRANT(2)
---- ----------- ------------- --------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Joseph P. Sullivan 43,191 47.12% $22.875 01/24/06 $ 51,400
C. Gregory Schonert 11,492 12.54% 22.875 01/24/06 13,700
Michael J. McGee 10,820 11.81% 22.875 01/24/06 12,900
Thomas T. Schleck 26,148 28.53% 21.375 04/15/06 36,600
</TABLE>
- ---------------
(1) Stock options were granted in tandem with dividend equivalent rights
("DERs") at the fair market price of the Company's Common Stock on the date
of grant. All stock options granted in 1996 were options to purchase Common
Stock. At December 31, 1996, the number of DER shares relating to options
for Common Stock granted in 1996 held by the Named Executive Officers were
as follows: Mr. Sullivan: 4,083; Mr. Schonert: 1,086; Mr. McGee: 1,023; and
Mr. Schleck: 1,854. The dollar value of all such DER shares at December 31,
1996, based on the closing price of the Common Stock on December 31, 1996,
was $192,100.
(2) Estimated present values as of the dates of grant are based on the
Black-Scholes Model, a mathematical formula used to value options traded on
stock exchanges. The Black-Scholes Model considers a number of factors,
including the stock's volatility and dividend rate, the term of the option,
and interest rates. The ultimate value of the options will depend on the
future market price of the Common Stock, which cannot be forecast with
reasonable accuracy. The expected volatility of the Common Stock used in
valuing the options is 15%, and is based on the historical volatility of the
Common Stock. The future dividend yield assumed in valuing the options is
8.0%. The options are valued assuming they have an expected life of 8 years.
The weighted average risk-free rate of return used in valuing the options is
5.88%. This weighted average risk-free rate of return was determined based
upon the quoted yields for U.S. Treasury Strips (principal only securities)
with a term equivalent to the expected life of the options at the
approximate date the options were granted. Estimated present values do not
include DERs.
11
<PAGE> 14
AGGREGATED OPTION EXERCISES IN 1996 AND OPTION VALUES AT DECEMBER 31, 1996
The following table sets forth certain information concerning the exercise
of stock options by the Named Executive Officers during the year ended December
31, 1996 and the value of stock options held as of December 31, 1996 by each of
the Named Executive Officers:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1996 DECEMBER 31, 1996(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph P. Sullivan(3)
Common Stock 0 $ 0 145,500 69,787 $1,337,900 $412,700
Depositary Shares 0 0 14,551 2,659 24,300 7,600
C. Gregory Schonert
Common Stock 12,500 34,000 50,055 18,246 240,800 106,500
Depositary Shares 0 0 6,256 675 2,200 1,900
Michael J. McGee(3)
Common Stock 0 0 39,024 17,321 185,400 101,600
Depositary Shares 0 0 3,903 650 1,700 1,900
Thomas T. Schleck
Common Stock 0 0 0 26,148 0 109,600
Depositary Shares 0 0 0 0 0 0
</TABLE>
- ---------------
(1) Value realized at exercise is the difference between the sales price of the
underlying shares less the exercise price per share of Common Stock,
multiplied by the number of shares acquired upon exercise.
(2) Calculated based on the closing prices of the Common Stock and the
Depositary Shares at December 31, 1996 multiplied by the number of
applicable shares in-the-money, less the total exercise price for such
shares and considering accumulated tandem DER shares.
(3) Includes options received by Messrs. Sullivan and McGee, at their election,
in lieu of a portion of their 1993 and 1994 bonuses, respectively, as set
forth in Notes 4 and 5 to the "Summary Compensation Table".
EMPLOYMENT AGREEMENTS
Joseph P. Sullivan is entitled to receive minimum compensation under a
three-year employment agreement with the Company at a rate of $515,000 per annum
in 1997. Messrs. Schonert, McGee and Schleck are entitled to receive minimum
compensation under two-year employment agreements with the Company at the rate
of $180,000, $180,000 and $208,000 per annum in 1997, respectively. If the
employment of Mr. Sullivan is terminated by reason of a "change of control" (as
defined in his employment agreement), he will be entitled to receive a payment
equal to three times his average salary plus bonus for the three most recent
years. If the employment of either Messrs. Schonert, McGee or Schleck is
terminated by reason of a
12
<PAGE> 15
"change of control" (as defined in their employment agreements), he will be
entitled to receive a payment equal to two times his average salary plus bonus
for the two most recent years.
INCENTIVE BONUS PLAN
The Company's incentive bonus plan for fiscal 1996 covered a total of 13
employees, including executive officers. The incentive program is designed to
reward the Company's employees based upon the Company's attaining or surpassing
goals for annual cash flow per share and other operating and strategic goals.
Actual incentive bonus awards granted are determined by a "base" award schedule
specified by the Compensation and Board Affairs Committee of the Board of
Directors and are contingent upon achievement of specified goals. Awards are
determined at year end and depend upon (a) the Company's actual cash flow per
share versus the goals set at the start of the year, (b) growth in the current
year's cash flow per share, and (c) a judgmental review by the Committee of the
Company's operational and strategic performance.
STOCK INCENTIVE PLANS
The Company's Board of Directors and shareholders have approved the 1988
Stock Option Plan (the "1988 Plan"), the 1990 Stock Incentive Plan (the "1990
Plan") and the 1994 Stock Incentive Plan (the "1994 Plan") (collectively, the
"Plans"). A total of (i) 450,000 shares of Common Stock have been reserved for
issuance under the 1988 Plan, (ii) 750,000 shares of Common Stock have been
reserved for issuance under the 1990 Plan, and (iii) 1,000,000 shares of Common
Stock have been reserved for issuance under the 1994 Plan. Each of the Plans
provides for the granting of stock options, shares of restricted stock and stock
appreciation rights to key employees, and the 1994 Plan also provides for the
granting of deferred shares, performance shares and performance units to key
employees. The number of shares covered by the Plans and outstanding awards are
subject to an adjustment in the case of changes in the Company's capital
structure, business combinations, reorganizations and similar events. In July
1995, the Company adjusted then outstanding awards under the Plans to reflect
the Distribution, which resulted in the Company's issuance pursuant to the Plans
of a limited number of restricted Depositary Shares and options to purchase
Depositary Shares (together with DERs). The Company does not intend to award any
additional restricted Depositary Shares or options to purchase Depositary
Shares, but may issue additional Depositary Shares in connection with existing
dividend equivalent rights with respect to options to purchase Depositary
Shares. See "-- Adjustments to Stock and Option Awards to Reflect the
Distribution."
Stock options and deferred shares may be granted in tandem with DERs.
Holders of restricted stock are entitled immediately to voting, dividend and
other ownership rights in the shares, but are subject to restrictions based
upon, among other things, continued service with the Company or the achievement
of specified performance objectives ("Management Objectives"). Stock
appreciation rights may either be related to specific stock options or may be
granted independent of any stock options. An award of deferred shares
constitutes an agreement by the Company to deliver shares of Common Stock to the
participant in the future in consideration of the performance of services,
subject to the fulfillment of such conditions during the period of deferral.
During the deferral period, the participant has no right to transfer any rights
covered by the deferred share award and no right to vote the shares covered by
the award. Performance shares and performance units may be granted, the payment
of which is conditioned on the achievement by the participant of one or more
Management Objectives within a specified period. If by the end of the
performance period the
13
<PAGE> 16
participant has achieved the specified Management Objectives, the participant
will be deemed to have fully earned the performance shares or performance units.
Options granted under the Plans may be either incentive stock options
within the meaning of Section 422A of the Internal Revenue Code (the "Code") or
nonstatutory options. The exercise price of incentive stock options granted
under the Plans must not be less than the fair market value of the Common Stock
on the date of grant and the maximum term of each option may not be longer than
10 years. In the case of incentive stock options, the aggregate fair market
value of optioned shares (determined at the time of the grant) becoming
exercisable by any optionee in any calendar year may not exceed $100,000.
The number of outstanding options to purchase Common Stock and Depositary
Shares and the number of shares of restricted stock held by employees of the
Company as of December 31, 1996 are set forth above in "Aggregated Option
Exercises in 1996 and Option Values at December 31, 1996" and in the Notes to
the "Summary Compensation Table," respectively. As of December 31, 1996, no
stock appreciation rights, deferred shares, performance shares or performance
units had been granted pursuant to the Plans.
The Plans presently are administered by the Board of Directors and the
Compensation and Board Affairs Committee. The Compensation and Board Affairs
Committee selects the employees to whom awards will be granted and recommends
the type and amount of each award, subject to the terms of the Plans.
MONEY PURCHASE RETIREMENT PLAN
The Company has a Money Purchase Retirement Plan (the "Money Purchase
Plan") pursuant to which it provides retirement benefits for all of its
employees. The Company is required to make an annual contribution pursuant to
the Money Purchase Plan on behalf of its employees, subject to a maximum
contribution for each participant not to exceed the lesser of $30,000 or 25% of
the participant's annual compensation. A participant's interest in contributions
made to the Money Purchase Plan for his account become 100% vested after one
year of service with the Company. Benefits are payable to participants upon
their retirement, termination or death. The Company is required to fund annual
contributions pursuant to the direction of participants into various investment
funds managed by a brokerage firm. The Company plans to adopt a senior executive
retirement plan that will provide retirement benefits to the Company's chief
executive officer that will not be subject to the maximum contribution
limitations of the Money Purchase Retirement Plan.
MEDICAL EXPENSE AND FINANCIAL PLANNING REIMBURSEMENT PLAN
The Company has a medical expense and financial planning reimbursement plan
for executive officers. Participants in this plan are entitled to reimbursement
for (i) certain medical, dental and vision expenses incurred by them and their
dependents to the extent such expenses are not covered by other health care
plans and insurance policies maintained by them or by the Company and (ii)
certain financial, tax and estate planning expenses incurred by them. The
maximum amount of such expenses for any one year that may be reimbursed is
$10,000 for each participant.
14
<PAGE> 17
DIRECTOR COMPENSATION AND DIRECTOR STOCK OPTION PLANS
Cash Compensation. Outside directors of the Company (other than outside
directors who may serve as the Chairman) receive a retainer fee for their Board
work in the amount of $24,000 per year. An outside director who serves as the
Chairman of the Board receives a retainer fee for his Board work in the amount
of $48,000 per year. Outside directors receive an additional $1,000 payment for
each meeting attended of any Committee on which they serve (except for the
Chairman of the Committee, who receives $1,500 for each Committee meeting
attended).
Stock Option Plans for Nonemployee Directors. Outside directors who were
directors of the Company on the date the 1988 Plan was approved by the Company's
shareholders received an option to purchase 20,000 shares of Common Stock
pursuant to the 1988 Plan. In addition, outside directors who were directors of
the Company on the date the 1990 Plan was approved by the Company's shareholders
received an option to purchase 20,000 shares of Common Stock pursuant to the
1990 Plan. Furthermore, pursuant to either the 1990 Plan or the Company's
Nonqualified Stock Option Plan for Nonemployee Directors (the "Directors Option
Plan"), which was approved by the shareholders of the Company on May 11, 1994,
an option for 20,000 shares of Common Stock will be granted to a new nonemployee
director upon his election to the Board, and an option for 10,000 shares of
Common Stock will be granted to each incumbent nonemployee director on each
January 31 during the period such person continues to serve as a nonemployee
director. A total of 400,000 shares of Common Stock have been reserved for
issuance under the Directors Option Plan.
The exercise price of the options granted under the 1988 Plan and the 1990
Plan must not be less than the fair market value of the Common Stock on the date
of grant. The exercise price of the options granted under the Directors Option
Plan is equal to the average of the closing price of the Common Stock on the
NYSE for the five trading days commencing on February 15 (or the first trading
day thereafter if such date is not a trading day) of the year in which the grant
is made. The maximum term of each option granted under the 1988 Plan, the 1990
Plan and the Directors Option Plan may not be longer than 10 years.
Under the terms of the Directors Option Plan, a nonemployee director may
elect to have his or her director's fees credited to an account in Units (an
accounting unit equal in value to one share of Common Stock). Deferred fees
payable in Units will be credited to a nonemployee director's account at the end
of each fiscal quarter on the basis of the average of the closing prices of the
Common Stock on the NYSE on the last trading day of each calendar month during
the quarter. After the end of the third fiscal year after each fiscal year in
which any deferred fees have been credited to a nonemployee director's account,
unless such nonemployee director shall have elected to have his or her entire
deferred amount distributed upon termination of services as a director, the
Company shall deliver to such nonemployee director that number of full shares of
Common Stock that is equal to the number of Units credited to such nonemployee
director's account with respect to such fiscal year, including the dividend
equivalents allocable to such Units. Upon the termination of service of the
nonemployee director as a director of the Company for any reason, the Company
shall pay the nonemployee director or his or her beneficiary, as the case may
be, the balance of his or her account in full shares of Common Stock in one lump
sum. One nonemployee director elected to have his director's fees credited to
his account pursuant to the Directors Option Plan in 1996 and 1997, and one
additional nonemployee director elected to have a portion of his director's fees
credited to his account pursuant to the Directors Option Plan in 1997.
15
<PAGE> 18
Directors Retirement Plan. The Retirement Plan for Outside Directors (the
"Director Retirement Plan") provides that nonemployee directors are eligible for
a retirement benefit if they retire from the Board with at least five years of
service. An eligible retiring director will receive an annual benefit for a
number of years equal to his years of service on the Board up to a maximum of 10
years. The annual benefit is equal to the annual base director fee in effect as
of the date of a director's retirement. All benefit payments terminate upon the
death of a director. The Director Retirement Plan is unfunded.
Directors Deferred Compensation Plan. The Company has a Directors Deferred
Compensation Plan that allows a member of the Board of Directors to defer the
payment of compensation payable by reason of that person's capacity as a
director. Pursuant to the Plan a director may elect to defer payment of between
50% to 100% of such compensation in any calendar year. Any compensation that is
deferred shall be paid in accordance with the election by the director, together
with accrued interest at a rate equal to the prime rate used by Wells Fargo
Bank, N.A. No director deferred any compensation pursuant to this plan in 1996.
ADJUSTMENTS TO STOCK AND OPTION AWARDS TO REFLECT THE DISTRIBUTION
In July 1995, the Company sought to separate the economic attributes of its
core portfolio of investments and its portfolio of psychiatric hospital
investments into two distinct portfolios, with two distinct classes of publicly
traded shares intended to represent those portfolios. On July 25, 1995, the
Company distributed one Depositary Share for every ten shares of Common Stock
held of record on July 14, 1995, each such Depositary Share representing a
one-tenth interest in the Psychiatric Group Preferred Stock. Each holder of
restricted stock also received in the Distribution one Depositary Share for
every ten shares of restricted Common Stock held on July 14, 1995. Restrictions
on Depositary Shares distributed to holders of restricted Common Stock lapse on
the same terms as the restrictions on the Common Stock held by such persons.
In connection with the Distribution and the anti-dilution provisions of the
Plans, the Company has adjusted each stock option outstanding at the date of the
Distribution to reflect the issuance of the Depositary Shares. Each option and
the accumulated tandem DER shares outstanding on July 25, 1995 was converted
into two awards: one for the same number of shares of Common Stock and the other
for one-tenth of that number of Depositary Shares, separately exercisable at
prices based on the former exercise price apportioned on the basis of the fair
market value of the Common Stock and the Depositary Shares on July 25, 1995.
16
<PAGE> 19
COMPENSATION AND BOARD AFFAIRS COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation and Board Affairs Committee of the Board of Directors, which is
composed entirely of nonemployee directors. None of these nonemployee directors
has any interlocking or other relationship with the Company that would call into
question his independence as a member of the Compensation and Board Affairs
Committee.
The Compensation and Board Affairs Committee retained the services of
Frederic W. Cook & Co., Inc., a nationally-recognized executive compensation
consulting firm, to assist the Committee in the development and ongoing
implementation of the Company's compensation program. Based largely on the
information provided by Frederic W. Cook and Co., Inc., which included a survey
of other REITs in the health care industry, the Committee believes that the
Company's compensation program is within the intermediate range for comparable
companies.
COMPENSATION PHILOSOPHY
The Compensation and Board Affairs Committee believes that the primary
focus of the Company's compensation program should be related to creating value
for shareholders. The Committee also believes that the compensation program
should be designed to retain key executives as employees and to encourage them
to accumulate ownership of the Company's stock. In structuring the compensation
program, the Committee has designed the program to balance short and long-term
incentive compensation to achieve desired results and, above all, to pay for
performance. In arriving at its conclusions as to total appropriate compensation
for a particular year, the Committee takes into account management's
accomplishments that may impact short-term performance but that are expected to
enhance long-term total return.
COMPENSATION MIX
The Company's executive compensation is based on three components designed
in each case to accomplish the Company's compensation philosophy.
Base Salary. Salaries for executives are reviewed by the Compensation and
Board Affairs Committee on an annual basis and may be adjusted based upon an
assessment of the individual's contribution to the asset and financial growth of
the Company; competitive pay levels; the executive's demonstrated ability to
work as a member of the management team; and increases in the cost of living.
Annual Cash Incentive Awards. Annual cash bonus incentive awards are based
on the performance of the Company. The Committee believes that annual financial,
operational and strategic goals should be set for the organization and that
executive officers should receive incentive compensation when these goals are
met or exceeded. Conversely, the Company believes that there should be risk when
the goals are not met.
Awards granted are determined by a performance schedule specified by the
Committee and are contingent upon achievement of specified goals. Awards are
determined at year end and depend upon (a) the Company's cash flow per share
versus the goals set at the start of the year, (b) growth in the fiscal year's
cash flow per share and (c) a judgmental review by the Committee of the
Company's overall operational and strategic performance.
17
<PAGE> 20
For 1996, executive officers of the Company received cash bonuses ranging
from 75% to 98% of their maximum potential awards under the performance schedule
adopted by the Committee at the beginning of 1996. The Committee noted that the
Company achieved each of its operational and strategic objectives for the year.
These objectives included the reduction of the Company's cost of debt and
expansion of its liquidity, the further diversification of the Company's
investment portfolio, the development and implementation of a merchant banking
initiative, the strengthening of operations and realignment of management
responsibilities and the careful monitoring of psychiatric investments.
In accomplishing these objectives, investment grade debt ratings were
achieved from Moody's, Standard & Poor's and Duff & Phelps. As a result, the
Company's existing bank debt was paid off and its $152 million of private
placement debt was refinanced with a subsequent $220 million public debt
offering, leaving its $150 million bank line totally available for further
investments and achieving a 30% reduction in the Company's current cost of
long-term debt. Further portfolio diversification was accomplished with
investments in Alzheimer's care, assisted living and long-term acute care
hospital (LTAC) facilities. The merchant banking initiative resulted in the
Company's initial equity investment in an LTAC operating company. Operations
were strengthened and management responsibilities realigned with the addition of
a new Chief Investment Officer. Several restructurings of psychiatric
investments were accomplished to allow operators time to respond to changing
market and business conditions in an effort to maximize the long-term value of
these investments.
The Committee also considered that total return for the Company's Core
Group shareholders, assuming reinvestment of all dividends, was approximately
22% in 1996 and more than 50% over the past two years. Total return in 1996 for
the Psychiatric Group shareholders, assuming reinvestment of all dividends, was
approximately 28%.
Long-Term Incentives. The Compensation and Board Affairs Committee
administers the Company's employee stock incentive plans. Pursuant to these
plans, stock options were awarded in 1996 in order to retain and motivate
executives to improve long-term shareholder value.
Options to purchase Common Stock are granted at a price equal to the
current fair market value of the Common Stock at the time of grant and will be
of value to the executive only if the total return to shareholders increases
over time. Stock option awards vest over a two-year period. The Committee
recognizes that, because the Company must distribute at least 95% of its income
in the form of dividends in order to qualify as a REIT, over the long-run the
share price of the Common Stock may be sensitive to market interest rates that
are beyond management's control. Furthermore, much of the value created for
shareholders over time may be in the form of dividends. These factors make
traditional stock options, which reward only for price appreciation, ill-suited
for executive incentive compensation purposes for Company officers. For this
reason, the Committee determined in 1992 to couple stock option awards with
dividend equivalent rights. By adding dividend equivalent rights to stock
options, the options become a reward for total shareholder return instead of for
stock price growth alone. Depending upon individual performance and
contribution, award levels for annual stock option grants are intended to
approximate the fiftieth percentile of long-term incentive compensation for
comparable companies.
18
<PAGE> 21
COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(M)
Section 162(m) of the Internal Revenue Code, enacted in 1993, generally
disallows a tax deduction to public companies for compensation in excess of
$1,000,000 paid to a company's chief executive officer and the four other most
highly compensated executive officers. Qualifying performance-based compensation
is not subject to the deduction limit if certain requirements are met. The
Committee will continue to review the effects of its compensation programs with
regard to Section 162(m). The Committee will also evaluate alternatives to
ensure executive compensation is reasonable, performance-based and consistent
with the Committee's overall compensation objectives. The Committee reserves the
right to design programs that recognize a full range of performance criteria
important to the Company's success, even where compensation payable under such
programs may not be deductible.
CHIEF EXECUTIVE COMPENSATION
The Company has entered into an employment agreement with Joseph P.
Sullivan, President and Chief Executive Officer of the Company, which runs for a
term of three years and which is automatically extended for an additional year
on the last day of January of each year unless earlier terminated pursuant to
the terms of the agreement. The agreement provided for a base salary of $494,000
for 1996. Mr. Sullivan is not guaranteed any minimum bonus award or stock option
grant. Mr. Sullivan's salary for 1997 was increased from its previous level by
4.25% to $515,000.
The Committee and the full Board believe that the amount and terms of Mr.
Sullivan's compensation are consistent with general compensation levels within
the industry and are appropriate in view of the Company's accomplishments in
1996. These accomplishments include: establishing the financial strategy which
resulted in the Company's three investment grade debt ratings; strengthening
operations and realigning management responsibilities with the addition of a new
Chief Investment Officer; successfully assuming the role of Chairman of the
Board; remaining active on the Board of Governors of NAREIT and assisting in the
development of congressional tax reform proposals specific to the health care
REIT industry; creating one of the first merchant banking initiatives in the
health care REIT industry; and expanding the Company's investment profile as a
featured speaker at a variety of national long-term care industry conferences.
As shown above in the "Summary Compensation Table" set forth under the heading
"Restricted Stock Awards", consistent with the Committee's intent to create
additional long-term incentives, the Committee voted to award Mr. Sullivan, in
January 1996, a restricted stock grant of 3,910 shares of Common Stock vesting
over two years with the initial vesting occurring in December 1996. For 1996,
Mr. Sullivan received a cash bonus of $446,000, or 93% of the maximum potential
award under the performance schedule adopted by the Committee at the beginning
of 1996.
The Committee remains committed to establishing and maintaining a
compensation program that appropriately aligns the Company's executive
compensation with corporate performance and the interests of the shareholders
and that offers competitive opportunities in the executive marketplace. As such,
the Committee periodically reviews the compensation program in order to make
such changes as it considers necessary to achieve such objectives.
NORMAN BARKER, JR. SHELDON S. KING LOUIS T. ROSSO
19
<PAGE> 22
STOCK PRICE PERFORMANCE GRAPH
The graph below compares, on a quarterly basis and at July 25, 1995, the
cumulative total return of the Company, the S&P 500 Index and the NAREIT Equity
REIT Index from December 31, 1991 to December 31, 1996 assuming an initial
investment of $100. Total return assumes quarterly reinvestment of dividends
before consideration of income taxes. The cumulative total return represented by
the "AHP Composite" data reflects the cumulative total return on the Common
Stock for periods prior to July 25, 1995, and for periods on and after July 25,
1995, the sum of the cumulative total return on the Common Stock and the
cumulative total return on the Depositary Shares.
AMERICAN HEALTH PROPERTIES, INC.
STOCK PERFORMANCE
(FIVE-YEAR PERIOD ENDED DECEMBER 31, 1996)
<TABLE>
<CAPTION>
AHP
MEASUREMENT PERIOD AHP AHP DEPOSITARY
(FISCAL YEAR COVERED) COMPOSITE NAREIT S&P 500 COMMON SHARES
<S> <C> <C> <C> <C> <C>
12/91 100.00 100.00 100.00
3/92 87.32 100.66 97.45
6/92 93.89 103.32 99.36
9/92 64.83 110.37 102.44
12/92 63.43 114.59 107.67
3/93 81.60 139.39 112.28
6/93 84.62 135.39 112.86
9/93 97.66 148.04 115.75
12/93 88.25 137.11 118.43
3/94 90.23 141.78 113.91
6/94 88.54 144.39 114.37
9/94 88.88 141.44 120.00
12/94 76.96 141.46 119.97
3/95 81.01 141.22 131.65
6/95 87.83 149.52 144.15
92.97 153.05 149.88 84.55 8.42
9/95 97.88 156.57 155.61 90.90 6.99
12/95 99.38 163.06 164.88 92.57 6.82
3/96 106.86 166.76 173.73 96.96 7.90
6/96 107.22 174.18 181.53 99.59 7.64
9/96 108.11 185.58 187.14 100.71 7.40
12/96 121.17 220.56 202.74 112.47 8.70
</TABLE>
20
<PAGE> 23
PRINCIPAL SHAREHOLDERS OF THE COMPANY
The following table sets forth, as of February 14, 1997, information with
respect to persons known by the Company to be beneficial owners of more than
five percent of the shares of Common Stock. The Company is not aware of any
person who is a beneficial owner of more than five percent of the Depositary
Shares.
<TABLE>
<CAPTION>
SHARES OF
NAME OF COMMON STOCK
BENEFICIAL OWNER BENEFICIALLY OWNED
---------------- ------------------
<S> <C>
Franklin Resources, Inc.(1)................................. 1,747,465
777 Mariners Island Blvd.
San Mateo, California 94403
</TABLE>
- ---------------
(1) Represents 7.5% of the outstanding Common Stock on April 15, 1997. Includes
beneficial ownership of (i) 1,445,000 shares of Common Stock owned directly
by Templeton Global Advisors Limited, (ii) 191,565 shares of Common Stock
owned directly by Templeton/Franklin Investment Services, Inc., (iii) 84,900
shares of Common Stock owned directly by Templeton Investment Counsel, Inc.,
(iv) 21,000 shares of Common Stock owned directly by Templeton Investment
Management Limited and (v) 5,000 shares of Common Stock owned directly by
Franklin Management, Inc. Franklin Resources, Inc. ("FRI") is the parent
holding company of Templeton Global Advisors Limited, Templeton/Franklin
Investment Services, Inc., Templeton Investment Counsel, Inc., Templeton
Investment Management Limited and Franklin Management, Inc. Charles B.
Johnson and Rupert H. Johnson, Jr. (the "Principal Shareholders") each own
in excess of 10% of the outstanding common stock of FRI and are the
principal shareholders of FRI. FRI and the Principal Shareholders may be
deemed to be beneficial owners of such shares; however, FRI and the
Principal Shareholders disclaim beneficial ownership of these shares. This
information is based solely on information contained in a Form 13-G filed by
Franklin Resources, Inc. with the Securities and Exchange Commission on
February 11, 1997 and delivered to the Company.
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
(PROPOSAL NO. 2)
The Board of Directors has appointed an Audit Committee, whose members and
functions are described above under "Management -- Board Committees and
Meetings." Upon the recommendation of the Audit Committee, the Board of
Directors has appointed the firm of Arthur Andersen LLP, independent public
accountants, as auditors for the current fiscal year subject to the approval of
the shareholders of the Company. Arthur Andersen LLP have served as auditors of
the Company since 1987. Representatives of the firm are expected to be present
at the Annual Meeting and will have the opportunity to make a statement if they
desire to do so and are expected to be available to respond to appropriate
questions.
The shareholders are requested to approve, ratify and confirm the
appointment of the accounting firm of Arthur Andersen LLP as the auditors and as
independent public accountants for the Company for the year ended December 31,
1997.
The affirmative vote of a majority of the total number of votes represented
by the shares of Common Stock and Psychiatric Group Preferred Stock represented
and voted at the Annual Meeting, assuming a quorum is present, is necessary for
the approval of the appointment of Arthur Andersen LLP as the auditors and
independent public accountants for the Company for the year ended December 31,
1997.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE APPOINTMENT OF
ARTHUR ANDERSEN LLP AS AUDITORS FOR 1997.
21
<PAGE> 24
ANNUAL REPORT TO SHAREHOLDERS
The Company's Annual Report to Shareholders of the Company for the fiscal
year ended December 31, 1996 (the "Annual Report"), which includes financial
statements for the year ended December 31, 1996, has been sent to the Company's
shareholders under separate cover. Requests for additional copies of such report
should be directed to Investor Relations, American Health Properties, Inc., 6400
South Fiddler's Green Circle, Suite 1800, Englewood, Colorado 80111, Telephone
(303) 796-9793.
OTHER MATTERS
The Board of Directors knows of no business to be presented at the meeting
other than the matters stated in the notice of the Annual Meeting and described
in this proxy statement. If other matters should properly come before the
meeting, the Proxies will be voted in accordance with the best judgment of the
persons acting under the Proxies, and discretionary authority to do so is
included in the Proxy.
SHAREHOLDER PROPOSALS
Any shareholder proposal intended to be presented at the Company's next
annual meeting of shareholders must be received by the Company at its principal
executive offices on or before January 26, 1998 to be included in the Company's
proxy statement and form of proxy relating to that meeting.
By Order of the Board of Directors,
/s/ THOMAS T. SCHLECK
Thomas T. Schleck
Corporate Secretary
April 16, 1997
22
<PAGE> 25
- --------------------------------------------------------------------------------
PROXY COMMON STOCK
AMERICAN HEALTH PROPERTIES, INC. PROXY
6400 SOUTH FIDDLER'S GREEN CIRCLE, SUITE 1800, ENGLEWOOD, COLORADO 80111
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby nominates and appoints Joseph P. Sullivan, Michael J.
McGee, and each of them, as attorneys, agents and proxies of the undersigned,
with full powers of substitution to each, and hereby authorizes them to
represent and to vote, as designated below, all shares of Common Stock of
AMERICAN HEALTH PROPERTIES, INC. (the "Company") held of record by the
undersigned as of the close of business on April 3, 1997 at the Annual Meeting
of Shareholders to be held on May 23, 1997 or any adjournment thereof.
1. ELECTION OF DIRECTORS
To elect as Class I Directors for a three-year term expiring at the 2000
Annual Meeting the following nominees: James L. Fishel and James D. Harper,
Jr.
<TABLE>
<S> <C>
[ ]FOR all nominees listed above [ ]WITHHOLD AUTHORITY to vote for all nominees listed above
(except as indicated to the contrary below)
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. To approve the appointment of Arthur Andersen LLP as auditors and independent
public accountants for the Company's 1997 fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting.
PLEASE CONTINUE ON REVERSE SIDE
- --------------------------------------------------------------------------------
<PAGE> 26
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS. THIS PROXY
WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE
UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR EACH OF THE
PROPOSALS.
The undersigned hereby ratifies and confirms all that said attorneys and
proxies, or any of them, or their substitutes, shall lawfully do or cause to be
done by virtue hereof, and hereby revokes any and all proxies heretofore given
by the undersigned to vote at said meeting. The undersigned acknowledges receipt
of the notice of said annual meeting and proxy statement accompanying said
notice.
Dated , 1997
-------------------------
------------------------------------
(Signature)
------------------------------------
(Signature)
PLEASE SIGN EXACTLY AS NAMES ARE
SHOWN. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN
SIGNING AS AN ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL
CORPORATION NAME BY PRESIDENT OR
OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED
PERSON.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
<PAGE> 27
- --------------------------------------------------------------------------------
DEPOSITARY SHARES
INSTRUCTION CARD AMERICAN HEALTH PROPERTIES, INC. INSTRUCTION CARD
6400 SOUTH FIDDLER'S GREEN CIRCLE, SUITE 1800, ENGLEWOOD, COLORADO 80111
THIS INSTRUCTION CARD IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, a registered holder of Psychiatric Group Depositary Shares,
each representing one-tenth of a share of Psychiatric Group Preferred Stock of
AMERICAN HEALTH PROPERTIES, INC. (the "Company"), hereby authorizes and directs
the Depositary, through its nominee(s), to vote or to execute proxies to vote,
as instructed below, all Psychiatric Group Preferred Stock underlying the
Depositary Shares held of record by the undersigned as of the close of business
on April 3, 1997 at the Annual Meeting of Shareholders to be held on May 23,
1997 or any adjournment thereof.
1. ELECTION OF DIRECTORS
To elect as Class I Directors for a three-year term expiring at the 2000
Annual Meeting the following nominees: James L. Fishel and James D. Harper,
Jr.
<TABLE>
<S> <C>
[ ]FOR all nominees listed above [ ]WITHHOLD AUTHORITY to vote for all nominees listed above
(except as indicated to the contrary below)
</TABLE>
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
2. To approve the appointment of Arthur Andersen LLP as auditors and independent
public accountants for the Company's 1997 fiscal year.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. In its discretion, the Depositary is authorized to vote upon such other
business as may properly come before the meeting.
PLEASE CONTINUE ON REVERSE SIDE
- --------------------------------------------------------------------------------
<PAGE> 28
- --------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS. DEPOSITARY
SHARES WILL BE VOTED BY THE DEPOSITARY AS DIRECTED BY THE UNDERSIGNED. IF NO
INSTRUCTION IS GIVEN THE DEPOSITARY WILL ABSTAIN FROM VOTING WITH RESPECT TO THE
PSYCHIATRIC GROUP PREFERRED STOCK UNDERLYING THE DEPOSITARY SHARES FOR WHICH NO
INSTRUCTIONS HAVE BEEN GIVEN.
The undersigned hereby ratifies and confirms all that said Depositary, or any
of its nominee(s), or their substitutes, shall lawfully do or cause to be done
by virtue hereof, and hereby revokes any and all instructions heretofore given
by the undersigned to vote at said meeting. The undersigned acknowledges receipt
of the notice of said annual meeting and proxy statement accompanying said
notice.
Dated , 1997
--------------------------
------------------------------------
(Signature)
------------------------------------
(Signature)
PLEASE SIGN EXACTLY AS NAMES ARE
SHOWN. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN
SIGNING AS AN ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR GUARDIAN,
PLEASE GIVE FULL TITLE AS SUCH. IF A
CORPORATION, PLEASE SIGN IN FULL
CORPORATION NAME BY PRESIDENT OR
OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED
PERSON.
PLEASE MARK, SIGN, DATE AND RETURN THIS INSTRUCTION CARD PROMPTLY USING THE
ENCLOSED ENVELOPE.
IN ORDER FOR THE DEPOSITARY TO VOTE, THIS INSTRUCTION CARD MUST BE SIGNED,
DATED AND RECEIVED BY THE DEPOSITARY ON OR BEFORE 5:00 P.M. PDT ON MAY 22, 1997.
- --------------------------------------------------------------------------------
<PAGE> 29
American Health Properties, Inc.
6400 South Fiddler's Green Circle, Suite 1800
Englewood, Colorado 80111
YOUR VOTE IS IMPORTANT TO THE COMPANY
PLEASE SIGN AND RETURN YOUR PROXY/instruction card BY TEARING OFF THE TOP
PORTION OF THIS SHEET AND RETURNING IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
IN ORDER FOR THE DEPOSITARY TO VOTE, THIS INSTRUCTION CARD MUST BE SIGNED,
DATED AND RECEIVED BY THE DEPOSITARY ON OR BEFORE 5:00 p.m. PDT on MAY 22, 1997.
<PAGE> 30
<TABLE>
<S> <C>
THIS PROXY/INSTRUCTION CARD IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Please mark [X]
your votes as
indicated in
this example
WITHHOLD
FOR AUTHORITY
Proposal Number 1 - ELECTION OF DIRECTORS: To elect as Class I Directors for a [ ] [ ]
three-year term expiring at the 2000 Annual Meeting the following nominees:
James L. Fishel and James D. Harper, Jr.
FOR AGAINST ABSTAIN
Proposal Number 2 - To approve the appointment of Arthur Anderson LLP as [ ] [ ] [ ]
auditors and independent public accountants for the Company's 1997 fiscal year.
Proposal Number 3 - In their discretion, the proxies and Depositary are
authorized to vote upon such other business as may properly come before the
meeting.
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
the nominee's name in the space provided below.
- -----------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE PROPOSALS. WHEN THIS PROXY/INSTRUCTION CARD IS
PROPERLY EXECUTED, THE PROXIES WILL VOTE ALL SHARES OF COMMON STOCK HELD OF RECORD BY THE UNDERSIGNED
AND THE DEPOSITARY WILL VOTE ALL PSYCHIATRIC GROUP PREFERRED STOCK UNDERLYING THE DEPOSITARY SHARES
HELD OF RECORD BY THE UNDERSIGNED IN THE MANNER INSTRUCTED HEREIN BY THE UNDERSIGNED. IF NO INSTRUCTION
IS GIVEN, THE PROXIES WILL VOTE SUCH COMMON STOCK FOR EACH OF THE PROPOSALS, AND THE DEPOSITARY WILL
ABSTAIN FROM VOTING SUCH PSYCHIATRIC GROUP PREFERRED STOCK.
The undersigned hereby ratifies and confirms all that said attorneys and
proxies, or any of them, or their substitutes, and that said Depositary, or any
of its nominee(s), or their substitutes, shall lawfully do or cause to be done
by virture hereof, and hereby revokes any and all proxies and instructions
heretofore given by the undersigned to vote at said meeting. The undersigned
acknowledges receipt of the notice of said annual meeting and proxy statement
accompanying said notice.
Signature Signature Dated: ,1997
------------------------------------------------ ------------------------------------------- ---------
Please sign exactly as names are shown. When shares are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporation
name by president or other authorized officer. If a partnership, please sign in partnership name by authorized person.
- ------------------------------------------------------------------------------------------------------------------------------------
FOLD AND DETACH HERE
</TABLE>
<PAGE> 31
PROXY/ PROXY/
INSTRUCTION INSTRUCTION
CARD CARD
AMERICAN HEALTH PROPERTIES, INC.
6400 South Fiddler's Green Circle, Suite 1800,
Englewood, Colorado 80111
The undersigned hereby (i) nominates and appoints Joseph P. Sullivan and
Michael J. McGee, and each of them, as attorneys, agents and proxies of the
undersigned, with full powers of substitution to each, and hereby authorizes
them to represent and to vote, as designated below, all shares of Common Stock
of AMERICAN HEALTH PROPERTIES, INC. (the OCompanyO) held of record by the
undersigned as of the close of business on April 3, 1997 at the Annual Meeting
of Shareholders to be held on May 23, 1997 or any adjournment thereof, and (ii)
authorizes and directs the Depositary, through its nominee(s), to vote or
execute proxies to vote as instructed below, all Psychiatric Group Preferred
Stock underlying the Depositary Shares held of record by the undersigned as of
the close of business on April 3, 1997 at the Annual Meeting of Shareholders to
be held on May 23, 1997 or any adjournments thereof.
IMPORTANT: SIGNATURE REQUIRED ON REVERSE SIDE
